The overhead rates for federal awards and sub-awards are
determined in accordance with the provisions of section G-7
of the
OMB
Circular A-21
(effective May 1996). Federal policy requires
fixing rates for the life of the award at rates in effect
(including negotiated provisional rates that will be revised
when the federal rates are negotiated) at the time of the
award. See OSP's policy
Implementation
of "Fixed Rate" Requirements of A-21
. Most non-federal
awards are established at MIT billing rates which change each
FY to the current FYs federal negotiated rates. However,
both federal and nonfederal sponsors occasionally specify
a rate and/or base which differs from those which would normally
be applied under federal and/or Institute policies.

This document describes the practices for departments, laboratories
and centers (DLCs)
related to handling overhead information
on research WBS elements. It particularly focuses on the funding of underrecovery (U/R) incurred by Research WBS elements (other than U/R
resulting from Federal A-21 "Fixed Rate" requirements
or Training Grants). The DLCs
U/R posts to the DLC's U/R cost center. U/R resulting from Federal
A-21 "Fixed
Rate" requirements and Training
Grants post directly to the Institute,
not to the DLCs U/R cost center.
U/R may occur in any research WBS element
where overhead specifications are established at less than
the current federal negotiated rates. See OSP's
Indirect
Cost Rates
page on the web.

Note: Overhead
(OH) is also referred to as Facilities and Administration
(F&A;) costs or Indirect costs. The terms overhead
and F&A will
be used interchangeably throughout this document.
MIT prefers the term F&A; to be consistent with
the Federal government, but the SAP system refers
to overhead.

With proposal preparation, DLCs complete most research budgets
utilizing current federal negotiated research overhead rates
on a modified total direct cost (MTDC) base. However, occasionally
sponsor policies dictate a rate and/or base that will result
in overhead recovery below that which would be produced using
the federal negotiated research rates. When this occurs, the
DLC also prepares an estimate of the U/R of overhead for each
year of the project period. This estimate is for internal
purposes only and is not submitted to the sponsor with the
proposal.

On the MIT Proposal Summary Form, the DLC enters the sponsor's
overhead rate and base. DLC also enters the
anticipated U/R of overhead for each year of the proposal
with the source of funds identified to cover
the U/R. The funding source may be one or more of the following:

Discretionary cost object(s) identified by the
DLC, School, or Provost

Released general (The use of released general for F&A U/R requires
approval by a representative of the appropriate Dean.)

Sponsor-funded facility costs in lieu of, or in addition
to, F&A

Vice President for Researchs (VPRs) U/R budget,
1733000 (the proposal summary form requires an approval
signature by a representative of the appropriate Dean or
Vice President for Research)

If a funding source other than the above is negotiated, please email CAO at
ur-issues@mit.edu
to determine the correct journal entries to process funding. A copy of every MIT Proposal Summary Form for proposals incurring U/R,
independent of funding source, should be sent to Charlene
Placido, VPRs Office, 3-240; for the School of Humanities,
Arts, and Social Sciences, the proposals incurring U/R should
also be routed to Charlene.

OSP administrators are responsible for determining and entering
the
costing
sheets
and rates on Coeus input sheets. If the WBS element
will incur U/R (other than U/R resulting from Federal A-21
"Fixed Rate" requirements or Training Grants), OSP
administrators are also responsible for entering by Project
Year the U/R amount and source of funding as entered by the DLC on the
MIT Proposal Summary Form. See the
OSP
documentation on Research WBS Elements
.

Assigns and corrects a WBS
elements
costing
sheet
and
adjustment
keys
. An 001 and Notice of Award (NoA) will be generated
for new and changed WBS elements and sent to DLCs.

CAO

Calculates and processes corrections
and/or adjustments to posted F&A resulting from a change
to the costing sheet and/or adjustment keys and from the
assignment of a costing sheet that only approximates the
sponsor's base. CAO notifies DLCs of document number for
correcting JV entries after posting. See the CAO documentation,
New Underrecovery
Process
.

DLC

Reviews the WBS elements costing
sheet and adjustment key assignments on 001 and NoA and
reports to OSP any concerns.

Monthly, reviews the Summary Statements to verify accuracy
of all entries. DLC is not required to recalculate F&A on all its
cost objects each month, but to review for major errors
such as: no F&A posting when cost object is subject
to F&A, or the reverse; or that a cost object is incorrectly
assigned an off campus costing sheet when it should be on
campus, or vice versa.

Responsible for all entries that post to its U/R
cost center.

The F&A cost elements are used as follows:

The SAP costing sheets post the system calculated F&A
at MIT billing rates to the following cost elements:

600304

F&A On

600305

F&A Off

Cost Object

Cost Element

Debit

WBS Element

see above

Credit

Institute F&A

see above

If the wrong costing sheet had been assigned resulting
in an error in the posted MIT billing rate amount, a JV
must be prepared by CAO to correct the billing rate amount.
Since manual JV entries cannot post to 600304 or 600305
(6-series cost elements), the following (4-series) cost
elements are used:

490310

Correct Current Yr F&A
On

490311

Correct Current Yr F&A
Off

490312

Correct Prior Yr F&A
On

490313

Correct Prior Yr F&A
Off

Cost Object

Cost Element

Debit

Institute F&A

see above

Credit

WBS Element

see above

Note: The
SAP system uses the 6-series cost elements for
posting system calculated costs such as F&A,
EB, or settlements. Manual entries such as JV's
cannot post to the 6-series cost elements, but
instead must use the corresponding 4-series cost
elements.

If the sponsor funds F&A
at a base/rate other than MIT
billing rates, the SAP costing
sheets post an adjustment to
the billing rate amount to net
F&A
to the sponsor's base/rate amount
using the following cost elements:

600316

Adj F&A
On to Spon Base/Rate

600317

Adj F&A Off to Spon
Base/Rate

Cost Object

Cost Element

Debit

DLC U/R Cost Center

see above

Credit

WBS Element

see above

If the wrong costing sheet and/or adjustment key had been
assigned resulting in an error in the posted adjustment
amount:

OSP corrects the costing sheet and/or rates. An 001
and NoA will be generated for corrections and sent to
DLC.

Within two weeks of month-end close, CAO calculates
the necessary overhead corrections to prior months for
posted F&A, and notifies DLC of document numbers
for any JV correcting entries after posting. CAO's correction
entry reverses the incorrect U/R amount using the following
cost elements:

490318

Adj CY F&A
On to Spon Base/Rate

490319

Adj CY F&A
Off to Spon Base/Rate

490320

Adj PY F&A
On to Spon Base/Rate

490321

Adj PY F&A
Off to Spon Base/Rate

Cost Object

Cost
Element

Cost Element
Name

Allocation #

Debit

WBS Element

see
above

Adjust F&A
to Sponsor Base/Rate

WBS which incurred U/R

Credit

DLC U/R Cost Center

see
above

Adjust F&A
to Sponsor Base/Rate

WBS which incurred U/R

Note: CY
(Current Year) is used for posting adjusting F&A;
calculations applicable to the current MIT fiscal
year F&A.;
PY (Prior Year) is used for posting adjusting
F&A; calculations in the current MIT fiscal year
but applicable to prior fiscal years F&A.;

If an SAP costing sheet has not been
created for a sponsor's base, OSP
will assign a costing sheet that
most closely matches the sponsor's
base. Since the sponsor's base for
F&A; is different
than the costing sheet base on which
the sponsor's F&A; is
being calculated, OSP will enter
a note in Coeus and notify CAO
to process a monthly JV to manually adjust
the F&A; to the sponsor's
base/rate. Within two weeks of monthly
closing, CAO will calculate and
post these F&A; adjustment JV entries.
After posting CAO will email to
DLCs the JV document number for
the adjusting JV entries. If you
have a WBS that has been assigned
a costing sheet that only approximates
the sponsor's base, please wait
for CAO email notice before funding
the U/R for this type WBS. (Note:
Until CAO adjustment entries post,
the F&A; U/R
amount and the WBS uncommitted balance
will not be accurate.) If the F&A;
at billing rates has correctly posted
to the WBS element but the total
net F&A; charged to sponsor is incorrect
as a result of the assignment of
a costing sheet that only approximates
the sponsor's base, CAO will process
the following JV entry:

If the WBS net F&A is understated,

Cost Object

Cost Element Name

Allocation #

Debit

WBS Element

Adj CY F&A to Sponsor
Base/Rate

WBS which incurred U/R

Credit

DLC U/R Cost Center

Adj CY F&A to Sponsor
Base/Rate

WBS which incurred U/R

If the WBS net F&A is overstated,

Cost Object

Cost Element Name

Allocation #

Debit

DLC U/R Cost Center

Adj CY F&A to Sponsor
Base/Rate

WBS which incurred U/R

Credit

WBS Element

Adj CY F&A to Sponsor
Base/Rate

WBS which incurred U/R

OSP is responsible for assigning and correcting a WBS elements
costing sheet and adjustment keys and notifying DLCs of corrective
action via a Coeus NoA. For all changes to costing sheets
and/or adjustment keys, monthly CAO reviews the financial
data to determine whether overhead charges posted to the cost
object need to be corrected. Within two weeks of month-end
close, CAO is responsible for calculating and processing the
necessary overhead corrections to posted F&A resulting
from the assignment of a wrong costing sheet and/or adjustment
key. After posting JV entries, CAO will email the JV document
number to the DLC.

DLC U/R Cost Center

Monthly, DLCs will:

Review accuracy of the SAP Costing Sheet U/R entries which
post to one or more of the following cost elements:

When U/R has been cited as cost sharing,
CAO
will process
the following entry at the time the WBS element is created
and yearly thereafter:

Cost Object

Cost
Element

Cost Element Name

Allocation #

Debit

DLC Discretionary

800702

Cost Sharing-Transfer
Out

WBS which incurred U/R

Credit

WBS Element

800701

Cost Sharing-Transfer
In

WBS which incurred U/R

Debit

WBS Element

420317

Cost
Shared F&A Underrecovery - not MTDC

WBS which incurred U/R

Credit

DLC U/R Cost Center

420317

Cost
Shared F&A Underrecovery
-
not MTDC

WBS which incurred U/R

Since the full years cost sharing amount is posted
to the DLCs U/R Cost Center in the first month of
the project year, the net postings for this WBS element
in the DLCs U/R Cost Center will be in credit status
until such time the actual U/R equals the cost sharing amount.

If at FY-end the funded costs exceed the F&A U/R, the DLC should process the following entries to carry forward the credit balance to the next FY:

"FY" JV, Period "13" , Document Date "6/30/YY"

Cost Object

Cost Element

Allocation #

Debit

DLC U/R Cost Center

420317

WBS which incurred U/R

Credit

DLC Discretionary Cost Object

420317

WBS which incurred U/R

And

"SA" JV, Period "1", Document Date (Current Date)

Cost Object

Cost Element

Allocation #

Debit

DLC Discretionary Cost Object

420317

WBS which incurred U/R

Credit

DLC U/R Cost Center

420317

WBS which incurred U/R

For guidance on preparing final June entries to clear the
U/R cost center, send email to
ur-issues@mit.edu
.
Reminder:
The F&A U/R cost center must net to
zero at the end of each fiscal year. Therefore, funding for
June F&A U/R must be processed as a final June entry in
period 13
,
that is:

Document Date "06/30/YY" (YY=fiscal year that just ended)
Document Type "
FY
" Period "13"
Posting Date "06/30/YY" (YY=fiscal year that just ended)

CAO final audit of overhead will be based
on overhead specifications in Coeus. Any questions
CAO accountants have related to this information should be
directed to the appropriate OSP Contract Administrator and DLC Administrator. After processing any overhead correction
entries, CAO will send email with the JV document number to
the DLC Administrator.

Research F&A
U/R Cost Center
For the DLCs U/R Cost Center, the FYTD DTR entries
are sorted and subtotaled by WBS. This report will assist
administrators in determining the U/R amount to be funded.

2
.

Research F&A U/R
- Coeus IDC Information
For a DLC, displays Coeus IDC data for all research
WBS elements that may incur F&A U/R (excluding training
grants and Federal "Fixed Rate" competitive
segments). This report will assist administrators in
determining the source of funding for F&A U/R.

3
.

Research F&A U/R
- JV Template
DLCs may complete either the online SAP JV or the DW
JV template to fund U/R. A new JV rule has been implemented
for each entry that uses an U/R cost element (420316,
490318-490321, 800703-800704). The new rule requires
the user to enter the WBS element number (referred to
as "Allocation WBS") to which the entry refers
(that is, the WBS element that incurred the U/R). The
Allocation WBS is entered in column J for the JV upload;
in the WBS dialog box for the online JV.

For a selected month, the DW template will produce
a partially completed JV to be reviewed, completed,
and uploaded to SAP by the DLC administrator. The
JV template includes entries to clear the U/R cost
centers current month postings to cost elements
600316 (Adj F&A On to Spon Base/Rate) and 600317
(Adj F&A Off to Spon Base/Rate). The JV template
is created based on the assumption that all debit
entries to cost elements 600316 and 600317 will be
cleared with a credit entry to 800704 (F&A U/R
Funded Transfer In); all credit entries to 600316
and 600317 will be cleared with a debit entry to 800703
(F&A U/R Funded Transfer Out). The DLC must enter
a line for the other side of the entry; that is, the
debit cost object that will fund the U/R or the credit
cost object to which funds will be returned.

The DLC reviews the template for completeness and
accuracy. Template entries may not be correct, requiring
change, for example:

U/R resulting from the assignment of an incorrect
costing sheet and/or adjustment key is corrected by
CAO, not DLC. This type entry should be deleted from
template.

U/R funded by sponsor facility budget in lieu of
F&A, the cost element should be changed to 420316.
See #4 in the
Monitoring Phase
of the F&A U/R documentation.

4
.

Research
F&A U/R - Change in Master
Data
For DLCs WBS elements, the monthly changes to
costing sheets and adjustment keys are sorted by WBS
element. This report will assist administrators in identifying
the WBS that may require F&A correcting or adjusting
JV entries resulting from the assignment of a wrong
costing sheet and/or adjustment key. These JV entries
will be prepared and processed by CAO within two weeks
of month-end close.

Data Warehouse reports available for monitoring
underrecovery. When you access the Data Warehouse Reports
web page, scroll down the list of Research Administration
reports to find individual U/R reports: